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A company which operates a process costing system had work in progress at the start of last month of 400 units (valued at $3,000), which were 40% complete in respect of all costs. Last month 1,500 units were completed and transferred to the finished goods warehouse. The cost per equivalent unit for output produced last month was $20. The company uses the FIFO method of cost allocation.

What is the total cost of the 1,500 units transferred to the finished goods warehouse last month?

Correct Answer

$29,800

Total cost of finished goods can be calculated as:

Value of opening work in progress + value of work done in period on work in progress + value of work started and finished in the period

Value of work done in the period on work in progress = $4,800 ((400 – 160) x 20)

Value of work started and finished in the period = $22,000 (1,100 x 20)

Value of goods completed:

Value of opening work in progress = $3,000

Value of work done in the period on work in progress = $4,800

Value of work started and finished in the period = $22,000

Total = $29,800

This question is the same as the one you went through in the specimen exam no 21 and im plugging in the figures to each question the way you did it and im getting it wrong how is that? I have the exam on saturday a reply to this would be greatly appreciated.

Could it be different as in the question i posted its asking for the total cost and in the question on the specimen exam its asking for the value or does this matter. The questions look absolutely identical its just one is asking for the cost and the other is asking for the value could you please clarify this please?

The questions are indeed virtually identical, and total value and total cost are the same thing.

The answer of $29,800 is correct (as is my answer to the question in the specimen exam). You must have made a mistake somewhere in your own workings, but it is impossible for me to know what you did wrong because you have not shown your own workings!!

for question 21 i thought the requirement was the cost required to complete the wip i.e 40% *300* $10 plus the 1880 units * $10. Would this be the answer if the question asked for costs incurred and not value of finished goods?

Sir, for Section A Q. 22. How to understand the Standard hours for Actual production was 27000 hours? Doesn’t it mean that this month produced units actually need 2000 hours more than budgeted time to complete, yet company only spent 24000 hours to complete it?